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Fiscal System - Economics, UPSC, IAS. Notes | Study Indian Economy (Prelims) by Shahid Ali - UPSC

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Fiscal System

Fiscal System

  • Which deals with the receipts and expenditure of the govt.
  • The policy governing this system is known as the fiscal policy of the government.
  • Ministry of Finance is responsible for the administration of the finances of the government.
  • The ministry comprises 3 departments:
    • Department of expenditure
    • Department of revenue
    • Department of economic affairs

Fiscal System,Economics,UPSC,IAS,Test Preparation

 

Fiscal System,Economics,UPSC,IAS,Test Preparation

Budget

  • According to article 112 of the Indian constitution it is the “annual financial statement”.
  • Article 113 discusses the procedure to be followed in the formation of budget.

Fiscal System,Economics,UPSC,IAS,Test Preparation

Revenue receipts

Tax Revenue Receipts

  • It includes all “Direct & Indirect Taxes”

Non-Tax Revenue Receipts

  • It includes:
  • Profits, Dividends
  • Interest
  • Fee / fines
  • Grants (external)
  • Fiscal service
  • General Service like Banking, irrigation etc

Capital Receipts

  • Loan recovery
  • Borrowings
  • Postal deposits

Revenue Expenditure

  • Salaries / pensions
  • Interest payments
  • Subsidies
  • Defence expenditure
  • Law & order
  • Grants
  • On social service

Capital Expenditure

  • Loan disbursal
  • Loan repayments
  • Plan expenditure
  • Capital expenditure on defence (maintenance of forces, modernization)
  • Other liabilities

Plan expenditure

  • Done in the name of planning
  • These are asset creating or productive expenditures

Non-Plan expenditure

  • All consumptive and non-productive expenditures
  • * On the suggestions of the Sukhmoy Chakrawarte Committee “Development & Non-Development expenditures” were replaced by “Plan & Non-Plan expenditures” (in public finance literature)

    Data in the Budget

  • Actual data of the last year
  • Provisional data of current year
  • Budgetary estimates for the next year
  • Revised estimates (RE)

  • A current estimates of either the Budgetary estimates or the Provisional estimates
  • It is an interim data

Quick estimates (QE)

  • A kind of revised estimates which shows the latest situation
  • It is an interim data

Advanced estimates (AE)

  • A kind of Quick estimates but done sahead (in advance) of the final stage when data should have been collected
  •  It is an interim data

Types of Budgets

  • Balanced Budget
  • Surplus Budget
  • Deficit Budget
  • Gender Budgeting
  • Outcome and Performance Budget
  • Zero based Budget

Outcome and Performance Budget

  • It is part of result oriented budgeting
  • While outcome budget is presented by different departments the performance budget is presented by Finance department
  • Both go for quantitative as well as qualitative progress reports of the performance
  • Outcome budget is a micro level process while Performance is a macro level process
  • Basic objective is to bring transparency
  • Zero based Budget

  • first proposed by peter Phyrr;
  • first introduced by Jimmy Carter (1979 Budget) in USA
  • it is the allocation of resources to agencies based on periodic revaluation y those agencies of the need for all the programmes for they are responsible, justifying the continuance or the termination of each programme

 

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